What Is a Change Order?

 In construction, change is inevitable. No matter how carefully a project is planned, unforeseen circumstances, client requests, or design adjustments can alter the original course of work. When such changes occur, a change order becomes one of the most important tools to document and manage them.

A change order is more than just a formality—it is a legally binding amendment to the original contract that ensures fairness, accountability, and financial transparency for both the contractor and the client. It helps maintain order amid the complexity of construction projects, where even small modifications can affect cost, schedule, and quality.

This blog will explore what a change order is, why it’s essential, the different types that exist, how it affects project management, and the step-by-step process for handling change orders properly.

---

1. Understanding What a Change Order Is

A change order is a written document that modifies the original terms of a construction contract. It records any alteration in the scope of work, cost, or project schedule after the contract has been signed.

In simpler terms, it is an official record that says:

• “We’ve agreed to add or remove work.”

• “Here’s how it will affect the project cost and completion time.”

Change orders are typically issued when:

• A client requests additional work beyond the initial agreement.

• Unforeseen site conditions require modifications.

• Design errors or omissions are discovered.

• Material shortages or new regulations affect the project.

Without a documented change order, misunderstandings can arise, leading to disputes, unpaid work, or even project termination.

---

2. Why Change Orders Are Important

Change orders are essential in construction for several reasons. They protect all parties involved—clients, contractors, and subcontractors—by maintaining clear communication and mutual consent about changes.

a) Legal Protection

A signed change order provides legal evidence that both parties agreed to the modification. It prevents one side from later claiming they were unaware or did not approve the changes.

b) Financial Clarity

Change orders document how additional or reduced work affects the contract price. This ensures that contractors are fairly compensated for extra work and that clients are aware of new costs before proceeding.

c) Schedule Management

When changes impact the project timeline, a change order formally extends or shortens the completion date. This prevents penalties for delays caused by modifications.

d) Quality and Accountability

By specifying new materials, methods, or standards, change orders maintain quality consistency across the project.

e) Dispute Prevention

Most construction disputes arise from undocumented or poorly communicated changes. A properly executed change order keeps everyone aligned and prevents conflicts.

---

3. Common Reasons for Change Orders

Even the best-planned projects experience changes. Here are the most frequent reasons why change orders occur:

a) Client Requests

Clients may change their mind about design elements or request upgrades during construction—for example, switching from ceramic tiles to marble flooring or adding an extra bathroom.

b) Design Revisions

Architects or engineers may revise drawings after construction begins, often to correct design errors or improve performance.

c) Unforeseen Site Conditions

Sometimes hidden issues—like unstable soil, underground utilities, or structural weaknesses—are discovered only after work starts, requiring changes to the original plan.

d) Regulatory or Code Changes

New building codes, safety standards, or environmental regulations can require design adjustments mid-project.

e) Material Availability

If specified materials are unavailable or delayed, substitutions may need to be made, triggering a change order.

f) Estimation Errors

Errors in cost estimates, quantities, or measurements can result in the need for contract adjustments.

---

4. Types of Change Orders

Not all change orders are the same. They can be categorized based on their purpose and how they affect the contract.

a) Additive Change Order

This type adds work to the original scope, increasing both cost and time. For example, adding a new wing to a building.

b) Deductive Change Order

This removes certain elements from the project, reducing overall cost and duration—for example, eliminating a planned storage room.

c) Zero-Cost Change Order

Sometimes changes neither increase nor decrease cost but still need documentation, such as substituting one material for another with equal value.

d) Combination Change Order

A combination order includes both additions and deletions that offset each other.

---

5. The Components of a Change Order

A well-drafted change order should contain clear, detailed information to avoid confusion. The key elements typically include:

1. Change Order Number – A unique identifier to track changes.

2. Date of Issue – When the change order was prepared.

3. Project and Contract Information – Names of the project, client, and contractor, and reference to the original contract.

4. Description of the Change – A detailed explanation of what is being changed in the scope of work.

5. Reason for the Change – The justification for the modification.

6. Cost Impact – Additional or reduced costs associated with the change.

7. Schedule Impact – Any extensions or adjustments to the project completion date.

8. Supporting Documentation – Drawings, photos, or revised specifications.

9. Approvals and Signatures – Both parties must sign to make it valid and binding.

---

6. The Change Order Process

The process for issuing and approving a change order follows a structured series of steps to maintain transparency and fairness.

Step 1: Identification of the Change

Either the contractor or client recognizes that a modification is necessary. It could stem from a site condition, design error, or client request.

Step 2: Evaluation

The contractor assesses the impact on cost, materials, and schedule. Engineers or project managers may also review the feasibility and safety implications.

Step 3: Proposal Preparation

A formal change order proposal is drafted, detailing:

• The nature of the change.

• Labor, material, and equipment costs.

• Time implications.

• Any subcontractor effects.

Step 4: Review and Negotiation

The client reviews the proposal and negotiates terms, if needed. Both parties must agree on the financial and scheduling impacts.

Step 5: Approval and Authorization

Once agreed upon, both parties sign the document, making it an official amendment to the contract.

Step 6: Implementation

The contractor proceeds with the modified work according to the approved change order.

Step 7: Documentation and Recordkeeping

Copies of all change orders are filed alongside the main contract and project records. This documentation is critical for final billing and audits.

---

7. How Change Orders Affect Project Management

While change orders are necessary, they can significantly impact project execution. Proper management minimizes disruptions and cost overruns.

a) Cost Control

Change orders can increase project costs if not handled carefully. Contractors should analyze the budget and seek prior approval before implementing changes.

b) Schedule Adjustments

Major changes can delay completion. Clear communication about revised timelines prevents disputes over late delivery.

c) Workflow Coordination

Every change affects multiple teams—designers, subcontractors, suppliers. Effective coordination ensures smooth implementation.

d) Documentation Load

Change orders add to the administrative workload. Organized recordkeeping is vital for transparency and audits.

e) Client Relationship

Proper handling of change orders can strengthen trust between the contractor and client, showing professionalism and accountability.

---

8. Best Practices for Managing Change Orders

Successful management of change orders depends on discipline, communication, and documentation. Here are best practices to follow:

a) Establish a Clear Change Order Policy

Before the project begins, outline procedures for identifying, pricing, and approving changes. This prevents confusion later.

b) Keep Communication Open

Discuss potential changes early. Immediate communication between contractor, client, and design team avoids delays.

c) Document Everything

Never rely on verbal agreements. All changes should be documented in writing and approved before work proceeds.

d) Use Standardized Forms

A consistent format for change orders makes them easier to track and reduces errors.

e) Assess Impact Thoroughly

Always analyze how a change will affect the overall project—cost, time, quality, and risk—before approval.

f) Control Scope Creep

Clients sometimes make multiple small requests that accumulate into major unapproved changes. Enforce formal approval for every alteration.

g) Maintain Transparency

Ensure that clients understand the financial and scheduling implications of each change. Hidden costs damage trust.

---

9. Common Mistakes with Change Orders

Despite their importance, many projects suffer due to poor change order management. Common pitfalls include:

• Failing to document verbal changes.

• Proceeding with work before approval.

• Inaccurate cost estimation for changes.

• Incomplete descriptions of the modification.

• Ignoring cumulative schedule delays.

• Not tracking change order status properly.

Each of these mistakes can result in financial disputes, unpaid work, or project delays.

---

10. The Role of Technology in Change Order Management

Modern construction management software has made change order tracking easier and more transparent. Digital platforms allow contractors and clients to:

• Submit and approve change orders electronically.

• Attach digital drawings or photos.

• Track budget impacts in real time.

• Maintain organized records for audits.

Automation helps prevent lost paperwork and ensures every change is logged and traceable.

---

11. Legal and Financial Implications

Change orders have legal weight because they amend the original contract. Both parties must sign them for the change to be enforceable. If a contractor performs extra work without a signed change order, they risk not being paid for that work.

Similarly, clients are protected from unexpected costs since they must approve the change before it takes effect. Courts often side with the written agreement—so documentation is crucial.

---

12. Example Scenario

Imagine a contractor is building an office complex. During construction, the client decides to install energy-efficient windows instead of standard ones. The contractor submits a change order showing:

• Additional material cost: $25,000.

• Extended project duration: 10 days.

• Revised completion date: new timeline agreed upon.

Both parties sign the document, and the project proceeds with the new specifications. Without this formal process, the contractor could face disputes over payment or schedule delays.

---

13. Conclusion

A change order is one of the most powerful and necessary tools in construction contract management. It bridges the gap between the original plan and the realities of on-site execution, ensuring that every modification—big or small—is properly documented, approved, and compensated.

By clearly outlining what has changed, how much it costs, and how it affects the project timeline, change orders protect both contractors and clients from confusion and conflict.

In an industry where change is inevitable, professionalism lies in how those changes are managed. A well-documented, transparent change order system turns potential chaos into controlled progress—keeping projects on track, relationships intact, and trust strong from start to finish.